| Submit your comments on this article |
| Europe |
| Iceland Seizes Nation's Largest Bank, Suspends Trading on Stock Market |
| 2008-10-10 |
| The government of Iceland on Thursday seized control of the country's largest bank -- the third bank takeover this week -- and suspended trading on the stock market, as the North Atlantic island nation grapples with an unprecedented financial meltdown that has made it the first national casualty of the global economic crisis. The takeover Thursday of Kaupthing bank now leaves the government in control of Iceland's three major banks, following the seizure earlier this week of Landsbanki, the second largest, and Glitnir, the third biggest bank. The government said domestic depositors would have their money guaranteed and that bank operations, including ATM machines, would continue to operate normally. But there was nothing normal about this fiscal crisis,which in a few days has wiped out much of the wealth that had been accumulating here for the last decade. The financial crisis has also caused an unusual public dispute within Europe, as hundreds of thousands of Europeans have money deposited in Icelandic banks, mainly through an online bank called IceSave, a Web-only bank operated by Landsbanki. Iceland's recently privatized banks had invested heavily overseas, turning this remote country into a financial powerhouse known as the "Nordic Tiger." But the three banks' overall indebtedness was more than 10 times the gross domestic product of Iceland itself, and their growth and reach over the last 10 years had far outstripped the ability of this small country's central bank to back them up. When global credit markets tightened, it threatened to bankrupt the entire country. "The Nordic Tiger is not a tiger anymore," said Reykjavik University economics professor Oddgier Ottesen. "It's a kitten." The government, desperate for cash, will hold talks next Tuesday with Russia about a possible $5.4 billion loan, and the prime minister said help from the International Monetary Fund was "definitely an option." Iceland's spectacular fall has also meant pain for ordinary Icelanders who had heavily invested in stock in the three banks. In a country of just 310,000 people, as many as 80,000 held bank stock that is now worth nothing, according to Frosti Olafsson, deputy director and chief economist with the Iceland Chamber of Commerce. The country's pension funds were also invested in the banks. The country's battered currency, the krona, has lost a third of its value in recent days. Since many Icelanders took out foreign-currency loans for home mortgages and car purchases, the collapse of the krona has increased the amounts they owe. |
| Posted by:Fred |
| #1 Were its hands cold? |
| Posted by: mojo 2008-10-10 02:46 |